Question: PLEASE ANSWER ALL PARTS: PART A: Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual

PLEASE ANSWER ALL PARTS:

PART A:

Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $2.54 per share, and dividends are expected to grow by 2% per year. The required rate of return is 15%.

What is the value of the stock?

The company is now considering changing its dividend policy and reinvesting 80% of its earnings for faster growth in the future. Under the new policy, the company expects dividends to grow by 8% per year. However, reinvesting more funds implies paying out less to shareholders, so the last dividend would have been only $0.64 under the new policy.

What is the value of the stock under the new policy?

PART B:

Dakota Oranges Company paid an annual dividend of $3.78 per share yesterday. Dividends are expected to grow at a constant rate of 4% forever. The required rate of return is 11%.

What is the stock's current value?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Determine the missing amounts in each of the following four independent scenarios: a. X Co. had a $4,500 beginning balance in accounts receivable on January 1, Year 4. During Year 4, the company...

Problem 10 Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $2.54 per share, and dividends are expected to grow by 2% per...

Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $2.62 per share, and dividends are expected to grow by 2% per year. The...

Problem 10 * A late penalty of 10% will apply to new answers Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $2.58 per...

Problem 10 Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $3.18 per share, and dividends are expected to grow by 2% per...

Intro Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $3.67 per share, and dividends are expected to grow by 2% per year. The...

Consider ABC company which does not plan to sell stock, or buy back stock. ABC has 10 million shares of common stock outstanding. The actual price of the stock is $62.00 per share. The book value of...

Boston Bakery's current dividend policy is to pay out 80% of earnings as dividends. It just paid an annual dividend of $3.18 per share, and dividends are expected to grow by 2% per year. The required...

Please answer all parts to the question. Thank you! Alternative dividend policies Over the last 10 years, a firm has had the earnings per share shown in the following table a. If the firm's dividend...

PDQ plc is a medium-sized listed company. The results to 31 December 1999 have just been announced. Earnings per share (EPS) and declared dividends per share (DPS) for the last 5 years are shown...

Please Answer the following: Sky High Co. just paid a dividend of $2.2 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. If investors...

A certain town is in a certain country (this is a hypothetical problem). Each year ten percent of the town dwellers move to other parts of the country. Each year one percent of the people from...

he Gaynor Company had the following transactions involving notes payable during 2019. Jan. 15 Purchased office equipment from Corporate Outfitters and issued a 180-day, 8 percent note for $18,000....

Which of these makes an individual an accredited investor? A B A net worth of $ 1 million, not counting their primary residence An income of $ 8 0 , 0 0 0 in each of the last two years A combined...

Simulated annealing 2 . Genetic Algorithms 3 . Tabu Search 4 . Steepest Descent Algorithm 5 . Generative Adversarial Network 6 . Sigmoid Function 7 . Neural Networks 8 . Ollama 9 . Pareto frontier 1...